Not helping the market today: Economic data, which was far from conclusive for either the bulls or the bears. The S&P/Case-Shiller home-price index for 20 metro areas rose at a slower pace in December, while consumer confidence fell to 78.1, below forecasts for 80. Marketfield’s Michael Shaoul explains why the consumer confidence data wasn’t so bad:

Although the overall Conference Board Consumer Confidence index missed expectations, coming in at 78.1 vs 80, this inconsequential miss was more than compensated for by a very strong showing in the employment metrics. The Jobs Plentiful Index rose to 13.9%, the highest reading seen since June 2008, and although this remains sub normal it is part of a clear pattern of improvement. Meanwhile the Jobs Hard to Get index fell to 32.5%, the lowest reading since September 2008, further improving the sentiment towards employment. Although there is a possibility that a lower headline Unemployment Rate is itself influencing the poll the persistent improvement in these two metrics is useful anecdotal evidence that the employment situation in the US continues to normalize. We are still some distance away from the sort of readings seen in the last cycle (when Jobs Plentiful hovered in the low 30′s and Jobs Hard to Get in the low 20′s), let alone the much more buoyant data of the 1990′s boom, but the improvement in the poll is consistent with the degree of change in most employment metrics seen in recent quarters.

While investors, bloggers, strategists, etc., wonder what it all means for the market in, say, a week or a month, GMO’s James Montier says he knows where the S&P 500 will be in seven years: lower. He writes:

In our actual valuation work we use a variety of different models to estimate real expected returns. One of those is indeed the Shiller P/E, but it is the most optimistic model we use. The others are more cautious, because they essentially fully revert margins back to “normal,” whereas the Shiller model simply takes whatever is embedded in the most recent 10-year period.

As a general rule we average across the various models we use to generate our best forecast as to where real returns are likely to head, rather than relying upon one signal model (without exceptionally good reason). Doing so currently results in our expectation of a -1.1% real return for the S&P 500 over the next seven years. We continue to believe that the weight of valuation evidence suggests the S&P 500 is significantly overvalued at its current levels. Some call us “valuation bears”; we argue that we are simply valuation realists!

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There are 2 comments

FEBRUARY 25, 2014 9:18 P.M.

VK wrote:

Whatever. Use any metrics you like - some pundits will be right, and some will be wrong. The stock market is like anything else in life. If you get in for the long haul, you'll be ok. If you try to time it and play it to your benefit, you'll lose in the long run. No different than gambling, just that the participants think they know more about their craft than the Vegas crap shoot gambler. But, in the end, they're all cut from the same cloth.

FEBRUARY 26, 2014 6:18 A.M.

nanie wrote:

thank you so much i can't say anything .....no return no exchange......thats the only way i can share to the whole world..............i missed you all.............

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